This invention relates to a method of validating a credit card.
Credit cards are commonly sent through the post to their intended recipients. On receipt of the credit card, the holder signs the card and can then use it to conduct transactions. If the card is intercepted, in the post or otherwise, a third party can sign the card, and can then proceed to use the card fraudulently. Even in the case of large transactions where an authorisation must be obtained from the financial institution issuing the card, an unauthorized party may be able to use the credit card for some time, typically weeks or even months before it is realised that the credit card has been intercepted and it is recorded on a list of "hot" cards.
Furthermore, well made counterfeit cards are appearing in increasing numbers. If these are properly encoded, a vendor will not be able to distinguish genuine and counterfeit cards.
As a result of the above two problems, credit card issuing houses and banks are being defrauded of vast sums of money.